your eu exit update - .net framework

© IGD 2020 Source: The Border With The European Union, HM Government, July 2020

James Walton Michael Freedman

Chief Economist Senior Shopper Insight Manager

Your EU exit update

IGD Webinar

11.00h, 20th January 2021

© IGD 2021

Your presenters

James Walton

Chief Economist

Michael Freedman

Senior Shopper Insight Manager

© IGD 2021

Your agenda

1. The EU-UK Trade and Co-operation Agreement (TCA)

2. Ireland and Northern Ireland

3. Shopper sentiment

4. Q&A

© IGD 2021

Your agenda

1. The EU-UK Trade and Co-operation Agreement (TCA)

© IGD 2021 Image: Getty (editing by IGD)

No tariffs or quotas on trade in “originating” goods

© IGD 2021 Image: Getty

“Rules of origin” (ROOs) determine which goods qualify


The burden of proof is on traders

Acceptable proof of product origin

“Exporter statements” on

commercial documents (eg:

invoices)

and / or

“Importer knowledge”, based upon sound evidence (eg: supply chain

audits)

Supplier statements should take an approved form – an example is provided in UK govt guidance

There will be a limited “grace period” for evidence, lasting one

year

Refer to:

The Trade and Co-operation Agreement (TCS) – detailed guidance on the rules of origin

HM Government, December 2020


Goods may be “originating” if they are “wholly-obtained”

Method One

Wholly Obtained

Goods are created or obtained in a single

country, within either the EU or UK

No inputs of components or activities from

outside that country are permitted

(Exceptions are made for minimal processing, to

keep products in good condition)

Wholly obtained items automatically qualify for

preferential treatment

This method covers many basic, unprocessed

agri-food products

Examples:

Fish, caught in a nation’s waters

Meat, from animals raised on national territory

Vegetables, grown on national territory

© IGD 2021

Method Two

Substantially Transformed

Goods have undergone “substantial

transformation” within the EU or UK

“Substantial transformation” is determined

through one or more mechanisms:

Change in value (the “ad valorem” rule)

Change of tariff code

Specified industrial processes

Product-specific rules (PSRs) describe

treatment of different goods

Examples:

Turning apples into cider (change of code)

Weaving and dyeing cotton (specified process)

Goods may also “originate” via “substantial transformation”

© IGD 2021

“Product-specific rules” (PSRs) create some complexity

Tomato

ketchup

HS code 21.03.20

Change of tariff chapter

demonstrates

“transformation”

(and)

“Non-originating”

mustard may be added

See TCA p. 427

Tomato

juice

HS code 20.09.50

Change of tariff chapter

demonstrates

“transformation”

(but)

Weight of non-

originating sugar must

not exceed 40% of

product weight

See TCA p. 427

Chopped canned

tomatoes

HS code 20.02.10

All Chapter 07 materials

(ie: the tomatoes) must

still be “wholly-obtained”

See TCA p. 427

Fresh

tomatoes

HS code 07.02.00

Must be “wholly-

obtained” to have

“originating” status

See TCA p. 423

Processing


“Insufficient production” may disqualify goods

Examples of insufficient production under ORIG 7

Animal slaughter

Certain cereal processing

Certain sugar processing

Labelling

Peeling, shelling or stoning of fruit, nuts or veg

Preserving (eg: freezing)

Simple cutting

Simple mixing or diluting

Simple packing (eg: bottling)

Sorting or classifying

Washing

© IGD 2021

The TCA uses HS codes to classify goods

Harmonised Commodity Description and Coding

System (HS)

Section

(21 of these)

Heading

Sub-heading

(and suffixes, where used)

Chapter

HS code for ketchup

(IV) – 21.03.20

Section IV – prepared foodstuffs

Chapter 21 – misc edible preparations

Heading 03 - sauces

Sub-heading 20 – tomato sauces

© IGD 2021

The TCA allows “bi-lateral cumulation”

Production

EU (Italian) tomatoes

“Wholly-originated”

Exported to UK

ROOs met

No tariff payable

Re-exported to EU

ROOs still met

No tariff payable

Processing

Tomatoes cooked, chopped, herbed, canned

“Significant transformation”

Cumulation

Tomatoes now treated as UK origin

Retail

Sale in Italy

(or other EU market)


Tolerances may apply in some cases

Example of the general tolerance rule

A shipment of olive oil travels from the EU to

the UK

The importer claims exemption from any tariffs

that apply

The oil is 90% EU-origin and 10% non-EU-

origin (by weight)

This is within the general tolerance for agri-

food products of 15% (by weight)

The oil would count as an EU product and would therefore qualify for preference


“Accounting segregation” can be used for “fungible” goods

Some agri-food inputs are hard to distinguish

and keep track of – they are considered

“fungible” (eg: flour, oil, sugar)

For these, “accounting segregation” may be

used (ie: content of goods is determined via

financial records, not physical separation)

Tolerances do not necessarily have to be met

for every shipment

A trader can still claim preferential treatment, if tolerances are met over several shipments (ie:

average content is considered)

Consult customs officials if in doubt


Product and markets are now regulated separately


SPS checks now apply to agri-food goods at the border


EU fishing access to UK waters is reduced, not ended

© IGD 2021

Summary of provisions relevant to grocery businesses

Provision Key references

No tariffs or quotas on trade in goods between EU and UK GOODS 5, 6, 10, 18

To benefit, goods must originate from the EU or UK ORIG 3, 4, 5, 6, 7, 18

Product regulations should be based on existing standards TBT 4, 11

SPS checks can be applied to trade in agri-foods goods SPS 5

Pest- and disease-free areas will be recognised SPS 10

Co-operation on animal welfare, disease control, sustainability SPS 12, 16, 17, 18

Simplification and streamlining of customs procedures CUSTMS 2, 5, 9, 18

UK vessels to take greater share of fish caught in UK waters ANNEX FISH 1, 2

Co-operative, science-based management of fisheries FISH 2, 4, 6

© IGD 2021 Image Getty

Trader experiences were … OK … at least initially

© IGD 2021

Much will depend on the approach taken by officials

© IGD 2021 Images: Getty

The deal has not fully resolved the challenge of EU Exit

Deal does not remove extra admin for businesses

IT and physical infrastructure have not yet been tested

under heavy “load”

Deal does not allow businesses to relax

Development of border operation will continue for

years

Deal does not give “continuity” for businesses

Refer to government guidance on Border

Operating Model


The trade deal does not cover everything

Service trade

Limited market access for services – may affect UK

more than EU

Transport

Market access for hauliers, but cabotage rights limited

Market access for sea freight is more comprehensive

Freedom of movement

Limited visa-free movement for business travel

No mutual recognition of qualifications (maybe later)

Data sharing

The EU has not yet issued a “data adequacy” ruling for the

UK under GDPR

© IGD 2021

Your agenda

2. Ireland and Northern Ireland

© IGD 2021 Source: Getty

Ireland / UK trade has been disrupted, hopefully temporarily


“Groupage” of loads is creating particular headaches


Some activities create tariff exposure


Easements in the NI Protocol have limited life

© IGD 2021

Your agenda

3. Shopper sentiment

Shoppers’ focus is shifting


December January

Shopper confidence stable in December

© IGD 2021 Source: ShopperVista, IGD Research, Dec 2020 Base: 1,000 GB shoppers per month, balanced sample

-11

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Sep 2019 – fears of No Deal Brexit

Mar 2020 – COVID-19 pandemic crisis

IGD grocery shopper confidence index

May 2016 – run up to EU referendum

Dec 2013 – austerity and horsemeat scandal


© IGD 2021 Source: ShopperVista, IGD Research, Dec 2020 Base: 1,000 GB shoppers per month, balanced sample

IGD grocery shopper confidence index

0

-6

-7

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-6

-30

-25

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5

13-19 Dec

6-12 Dec20-26 Dec

1-5 Dec27-31 Dec


© IGD 2021 Source: ShopperVista, IGD Research, Dec 2020 Base: 1,000 GB shoppers per month, balanced sample: Image Source: Getty images

59%Shoppers claimed to shop online for food

and groceries

Dec’20 vs. 42% Dec’19

70

64

70

58

50

54

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Shopper thoughts on EU exit and personal finances

Concerned about the future of theUK economy

Worried about personal financesas EU exit preparations proceed

More careful how spend moneysince EU referendum

Worried about job security as EUexit preparations proceed

Concerns increased about EU Exit

© IGD 2021 Source: ShopperVista, IGD Research, Dec 2020 Base: 1k+ GB grocery shoppers in December., balanced sample

52

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52

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43

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Shopper concerns over EU exit and the UK food offer

Availability of favourite food

Ethical standards

Quality of food

Choice in supermarkets

Concerns about availability of favourite food

© IGD 2021 Source: ShopperVista, IGD Research, Dec 2020 Base: 1k+ GB grocery shoppers in December., balanced sample

Shopper focus now on the pandemic

© IGD 2021 Source: YouGov, Jan 2021 (with permission) Base: <1,600 people per week Note: Respondents may choose up to three items from a list of 14

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“Which of the following do you think are the most important

issues facing the country at this time?”

Top 3 responses Health

The economy

Britain leaving the EU

Concern for rising food prices due to EU Exit

© IGD 2021 Images: Getty Source:, IGD Research, 8-10 Jan’21

59% Higher than normal price increases 34% Having to eat lower quality food and grocery products

31% Having to eat a less healthy diet28% Having to stock up in case of food shortages

Current shopper stockpiling – COVID-19 vs EU Exit

© IGD 2021 Source: IGD Research, 08-10 Jan’21 Base: 1,072

23%25% 24%

21%

26%

64%58%

45%

50%

0

0.2

0.4

0.6

% of adults who have recently stocked up on food and grocery categories, or where they have purchased more than they normally do

EU Exit COVID-19

23/03

1st national lockdown announced

31/10

2nd national lockdown announced

04/01

3rd national lockdown announced

Similar categories being stockpiled for COVID-19 as EU Exit

© IGD 2021 Source: IGD Research, 06-07 Jan’21 Base: 1,074

4%4%4%6%6%6%7%

4%

9%

26%

11%13%14%14%15%16%16%17%

21%

50%

Hot drinksHousehold productsFrozen (meals, veg,ice-cream, desserts)

Medicines (over thecounter) - aspirin,

paracetamol

Breakfast cerealsmuesli, granola,cornflakes etc.

Toilet paperAlcohol (beer, wine,spirits)

Hand sanitiserTins and packagedfoods (soup, cannedbeans, pasta, rice)

Any

EU ExitCOVID-19

% of adults who have recently stocked up on food and grocery categories, or where they have

purchased more than they normally do

Planned shopper stockpiling – COVID-19 vs EU Exit

© IGD 2021 Source: IGD Research, 11-13 Dec’’20 Base: 1,093

32%30% 29%

21%

27%

58%

40%42%

38%

45%

0

0.2

0.4

0.6

% of adults who will or might stock up on food and grocery categories, or where they will or might purchase more than they normally do

EU Exit COVID-19

23/03

1st national lockdown announced

31/10

2nd national lockdown announced

04/01

3rd national lockdown announced


Any questions?


That’s all folks!

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